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Summer Budget 2015: IHT relief on main residence

The Summer Budget included plans for the government to enact one of the key planks of the Conservative Party’s election manifesto, which is to extend the inheritance tax (IHT) regime with the introduction of an additional nil-rate band when a main residence is passed on death to direct descendants, namely children and grandchildren

The increase in the IHT allowance will cost the government nearly a £1bn a year by 2020, with projections set at £630bn in 2018-19, £790bn in 2019-20, rising to £940bn in 2020-21.

The allowance will be set at £100,000 in 2017-18, £125,000 in 2018-19, £150,000 in 2019-20, and £175,000 in 2020-21. It will then increase in line with CPI from 2021-22 onwards.

The qualifying residential interest will be limited to one residential property but personal representatives will be able to nominate which residential property should qualify if there is more than one in the estate. A property which was never a residence of the deceased, such as a buy-to-let property, will not qualify.

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